The Vietnam Dong (VND) is among the most stable currencies in Asia this year, said the US-based Bloomberg News, echoed by similar views from Vietnamese economists who were confident that the stability would remain until the year end thanks to the economy’s positive signs.
The currency has been kept stable, weakening about 1 percent against the US Dollar since the start of this year. An increase in remittances was behind this, said Can Van Luc, a member of the National Financial and Monetary Advisory Council.
Remittances from Vietnamese living abroad were worth 13.4 billion USD in 2016, up 3 percent from the previous year, according to latest statistics by the World Bank. The remittances are forecast to grow 5-7 percent to exceed 14 billion USD this year, taking Vietnam to the top 15 countries with the biggest remittances, he noted.
The rising remittances have helped the country ensure enough dollar supply to meet the domestic demand and allowed the State Bank of Vietnam (SBV) to boost forex reserves. “Such a high level of foreign reserves will allow us to step in to stabilize the money market when needed”, said SBV deputy governor Nguyen Thi Hong on the sidelines of a meeting last month.
The central bank has adopted a more market-based management mechanism with reference exchange rates set on a daily basis since January 2016 in its effort to maintain the Vietnam Dong’s value.
Luc added that surge in foreign direct investment (FDI) has also helped stablise the currency. The Ministry of Planning and Investment’s Foreign Investment Agency reported that Vietnam drew in 28.24 billion USD in FDI in the first 10 months of this year, 12 percent higher than the country’s yearly target of 25 billion USD. The FDI disbursement was estimated at 14.2 billion USD during the period, up 11.8 percent year-on-year.
In addition, Vietnam has also witnessed a growth in foreign indirect investment over the past several years. Foreign investors have poured 4.2 billion USD into the local stock market in the first three quarters of the year, a 3-fold increase from 2016, according to Director of the Business Development Institute Le Xuan Nghia.
Ho Chi Minh City led the way in both FDI attractions and remittances. The southern economic hub lured around 5.03 billion USD in the first 10 months, doubling the year-on-year figure. In 2016, overseas remittances to the city reached 5 billion USD, accounting for 57-58 percent of the national total, a year-on-year rise of 11 percent. It aims a 10 percent growth to 5.5 billion USD this year.
More pressure will be likely on the Vietnam Dong at the end of the year due to the US Federal Reserve’s forecast benchmark interest rate rise and higher demand for foreign exchange from importers ahead the Lunar New Year holiday.